of carrying one jacket in inventory for one year is 0.40. The given solution is this: 200 = 2*setup cost* Annual Demand / Carrying cost200 = 2*2*4000/ Carrying cost40000 = 16000 / Carrying costCarrying cost = 16000 / 40000Carrying Cost = 0.4 Hence, the cost of carrying one jacket in inventory for one year is 0.4   QUESTION: How did you get the 40,000 (that was divided to 16,000)?

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ISBN:9781337406659
Author:WINSTON, Wayne L.
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Pingu Company manufactures winter jackets. Setup costs are $2.00. Penguin manufactures 4,000 jackets evenly throughout the year. Using the economic order quantity approach, the optimal production run would be 200 when the cost of carrying one jacket in inventory for one year is 0.40.

The given solution is this:

200 = 2*setup cost* Annual Demand / Carrying cost200 = 2*2*4000/ Carrying cost40000 = 16000 / Carrying costCarrying cost = 16000 / 40000Carrying Cost = 0.4

Hence, the cost of carrying one jacket in inventory for one year is 0.4

 

QUESTION:

How did you get the 40,000 (that was divided to 16,000)?

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